/** Title: Bajaj Housing Finance Q1 FY27: Strong growth, steady returns, but margins set to soften */

Bajaj Housing Finance Q1 FY27: Strong growth, steady returns, but margins set to soften

Bajaj Housing Finance reported a strong start to FY27, with growth-driven momentum in disbursements and assets under management, while keeping asset quality steady. For the quarter ended 30 June 2026 (Q1 FY27), profit after tax rose 23% year-on-year to 715 crore. The company delivered its highest ever quarterly disbursement and AUM growth, even as net interest margins edged lower and management guided for a fuller-year moderation.

AUM stood at 1,49,624 crore, up 24% YoY, and quarterly disbursements rose 33% YoY to 19,509 crore. Return ratios were stable to improving: annualised ROA remained at 2.3% while annualised ROE improved to 12.5%. The operating cost base also showed continued operating leverage, with opex-to-NTI improving to 19.6% from 21.2% in Q1 FY26.

Growth engine: diversified mortgage franchise, led by home loans and LRD

The quarter reinforced the company’s positioning as a diversified mortgage lender, with meaningful scale across both retail and commercial mortgage products. The AUM composition as of 30 June 2026 was led by home loans at 54.1%, followed by lease rental discounting at 23.1%, developer finance at 11.4%, loans against property at 10.3%, and others at 1.1%.

Management highlighted YoY AUM growth across anchor products. Home loans grew 20% YoY, lease rental discounting grew 41%, loans against property grew 22%, and developer finance grew 19%. The company also highlighted its geographic footprint of 20 States and Union Territories, 224 branches and 182 locations.

Within home loans, Bajaj Housing Finance continues to operate across multiple customer and transaction segments: salaried, self-employed and professional borrowers; prime, near-prime and affordable cohorts; and transaction types spanning purchase, resale, balance transfer and self-construction. It also pointed to structural sourcing advantages such as relationships in the developer ecosystem and an APF base of 9,800+ projects.

Financial snapshot (Q1 FY27)

Margins and cost of funds: spreads stable, NIM under pressure

Cost of funds moderated sequentially to 7.2% in Q1 FY27 from 7.3% in Q4 FY26. Management attributed the improvement to three factors: benefits from the hedged book, natural repayment of older higher-cost borrowings, and reset of some borrowings at lower rates.

Despite this, NIM slipped by 14 bps sequentially to 3.7%. In the earnings call, management explained that the expected compression is largely driven by yields. In a stable interest-rate regime, upward repricing opportunities are limited, while higher-yielding older assets run off and replacement assets are booked at prevailing competitive rates.

This is reflected in the company’s FY27 guidance: management expects NIM to moderate by 20 to 25 bps during FY27 versus FY26 levels. Since the quarter already saw a 14 bps decline versus Q4 FY26, management indicated that the remaining moderation could be limited to a low single-digit to about 10 bps from current levels, but reiterated the full-year guidance range.

The gross spread (portfolio yield minus cost of funds) remained at 1.7% in Q1 FY27. Portfolio yield was reported at 8.9% for the quarter, while cost of funds was 7.2%.

Asset quality: steady headline ratios, specific movements in LAP and developer finance

Bajaj Housing Finance reported resilient asset quality indicators during the quarter. GNPA was 0.29% and NNPA was 0.12%. Annualised credit cost was 5 bps versus 15 bps in Q1 FY26. Stage 2 assets were 0.32% and stage 3 provision coverage ratio stood at 58.53% as of 30 June 2026.

In the earnings call, management clarified that the unusually low 5 bps credit cost was not a new run-rate. It cited two one-off drivers: a higher assignment transaction in the quarter that reduced stage 1 provisioning, and the absence of a stage 2 provisioning acceleration that had been taken in Q4 FY26 due to macro uncertainty. For the full year, the company maintained credit cost guidance of 10 to 15 bps.

At a product level, the presentation showed home loans GNPA at 0.34%, LAP GNPA at 0.62%, developer finance GNPA at 0.12%, and other loans GNPA at 1.11%. Lease rental discounting showed no reported GNPA and NNPA in the product table.

Management addressed the two notable sequential movements. First, LAP GNPA rose to 0.62% from 0.46% in Q4 FY26, which management attributed to movement of a one-week account and stated that historically LAP GNPA has remained in the 50 to 70 bps corridor, with Q4 FY26 being an exception. Second, developer finance GNPA rose due to one account moving from stage 2 to stage 3, with management stating that resolution efforts are underway.

Strategy updates: Sambhav Housing scale-up, and deeper AI and digital penetration

A meaningful strategic thread in the deck and the call was the scaling of Sambhav Housing, the company’s near-prime and affordable housing initiative. Management reported a Q1 FY27 monthly disbursement run-rate of about 450 to 465 crore, up from 410 to 425 crore in the prior quarter. Average ticket size in the portfolio was stable at around 28 lakh, and about 64.8% of customers had bureau scores above 750.

The business is operational across 73 urban and 72 rural locations. The company reiterated its target to reach a 600+ crore monthly disbursement run-rate in the next 9 months. Management also discussed that affordable loans are roughly one-third of Sambhav disbursements, with affordable ticket sizes around 17 to 18 lakh, and indicated a possible mild downward bias in overall ticket size as the franchise expands into more non-metro locations.

The company also highlighted its digital initiatives and AI adoption. The deck reported around 95% penetration of retail logins through digital onboarding and around 95% of retail agreements through the customer portal. It also noted 72,000+ unique customers per month logging into the customer portal and app (for Jun 2026).

On AI, management described use cases across the lifecycle: AI voice agent for lead generation, sales and service call intelligence, credit PD call intelligence, commercial credit document intelligence, collateral intelligence with geo-analytics, AI customer assist, and AI tools for employee training and frontline hiring. The stated objective is to improve conversion, speed up processing, strengthen evidence-based underwriting and enhance controllership.

FY27 management assessment: growth steady, margins softer, asset quality guided to remain healthy

Bajaj Housing Finance kept its FY27 assessment largely consistent with prior ranges, while explicitly flagging macro uncertainty. Management noted geopolitical factors and volatility in money market borrowing costs as key variables.

The company’s FY27 assessment includes:

• AUM growth: 21 to 23%
• NIM moderation: 20 to 25 bps
• Opex to NTI: 19 to 20%
• GNPA: 30 to 35 bps
• Credit cost: 10 to 15 bps
• ROA: 2.1 to 2.3%
• ROE: 12 to 13%
• Leverage: 5.8 to 6.3 times

Notably, management also described housing demand as stabilising but slightly muted versus the prior two years. It linked this to the earlier phase of price momentum, which had pulled demand forward, while the current phase of price stabilisation can lead to more measured purchase decisions.

Takeaways

Q1 FY27 showed Bajaj Housing Finance leaning into scale, with strong disbursement momentum translating into 24% AUM growth and 23% PAT growth. Asset quality remained stable at low levels, and operating efficiency improved.

The key monitorable for FY27 is the margin trajectory. Management has been explicit that the compression is mainly yield-driven, with limited repricing opportunities in a stable rate and competitive environment. The second monitorable is whether the company can scale Sambhav Housing to its 600+ crore monthly run-rate target while keeping credit behaviour steady.

With strong capitalisation (CRAR 21.59% as of 30 June 2026) and a reported LCR of 158% for the quarter, the company appears well placed to pursue its FY27 growth targets, but investors will likely track whether spreads and credit costs normalise back toward guided ranges over the remaining quarters.